Twitter is losing customers and its stock is falling

February 12, 2016

It's hard for the small core of Twitter addicts to accept, but Twitter just isn't popular enough to be successful. In fact, Twitter is losing customers.

The social media company reported Wednesday that it lost 2 million users in the last three months of 2015. Shares plummeted as much as 12% in after-hours trading.

Twitter had 305 million active users by the end of 2015. By contrast, Facebook has 1.6 billion. Google has eight products with over 1 billion users each. Even Instagram surpassed Twitter in September, growing to 400 million users.

Though Twitter has been able to effectively generate sales from sponsored tweets and partnerships, it's growing at a snail's pace. It's still a relatively niche product that hasn't been able to expand its reach the way that its rivals have.

New management, products, designs and features haven't done much to move the needle. Twitter's growth has stagnated, and it's nowhere close to turning a profit.

Twitter is aware of the problem and has launched a slew of new products to address the issue. Notably, Twitter announced Wednesday that it is testing a new algorithm that will change the chronological order of feeds, hoping to appeal more to casual users who aren't obsessively keeping up with thousands of tweets in real time.

On a Periscope chat with analysts, Twitter CEO Jack Dorsey said its new timeline feature has shown "real promising growth" in user engagement.

"We're going to refine our core service and make everything more intuitive," Dorsey said. "There's an opportunity to fix broken windows and confusing aspects that are inhibiting growth. We think timeline is a big part of that."